Across the Pacific

In the fourth quarter of 2012, the Asia Pacific construction pipeline reached a record high with 2,401 projects (557,505 rooms). To put these numbers into perspective, just three countries—China, India, and Indonesia—make up 91 percent of the projects and 89 percent of the rooms in the region. China’s pipeline has a staggering 407,721 rooms—the highest room count in the world—and its project count of 1,622 is second only to the United States. It accounts for 68 percent of the projects and 73 percent of the rooms in Asia Pacific.

Despite China’s slowdown in economic growth in 2012, pipeline metrics continue to set record highs. Historically, China’s government, when faced with a possible economic softening, has invariably chosen to increase bank lending and infrastructure development as a way to rekindle the economy. This economic policy has kept its hotel pipeline accelerating forward for nearly three decades.

Of the 25 markets with the largest pipelines 21 are in China. Shanghai, the most populous city in the world (more than 23 million people), has the largest pipeline in Asia with 86 projects (17,025 rooms). But after two decades of frenetic activity, development may be topping out in the Paris of the East. Beijing has the next highest total with 64 projects (10,581 rooms), a year-over-year jump of 60 percent by projects and 12 percent rooms. This higher percentage increase in projects compared to rooms is common in many Chinese cities. It’s reflective of the growing number of smaller, midscale projects entering the pipeline as global franchise companies are looking to expand brand distribution with projects that appeal to China’s growing middle class.

India, whose pipeline peaked in the fourth quarter of 2010 and has been on the decline since, is at 350 projects (60,777 rooms). Indonesia is rapidly developing, having expanded its pipeline each quarter from its bottom established in the third quarter of 2010. At year-end, it has 181 projects (28,268 rooms) in the pipeline for a whopping year-over-year increase of 118 percent by projects and 101 percent by rooms. All other countries combined account for the remaining 248 projects (60,739 rooms).
Asia Pacific has the highest concentration of high-end construction projects of any global region. Of all projects in the Asia Pacific pipeline, 58 percent, or 1,204 projects, are in the upscale chain scale or higher. The remaining 42 percent (or 874 projects) are in the midscale chain scale or lower.